Taxation

Taxation In Australia Australia is a Federation of States Pre WW1 income tax was levied by the individual states During WW1 the federal government first levied Income Tax Between WW1 & WW2 uniform income tax was developed but still gathered by the states 1942 due to national emergency states handed income tax powers to federal government After WW2 the Federal Govt refused to hand powers back to the states

Taxation In Australia All Levels of government raise taxation. – Local Councils – State Governments – Federal Governments

Local Government Most of the tax raised is by the way of rates Other taxes may be in the way of levies & fees

State Taxes Payroll Tax Tax levied on wages paid Payable where yearly payroll is greater than $ Payroll Tax Rate = 6%

Payroll Tax - Wages Employee or contractor? Provisions were introduced to tax contracts where the contractor works and operates exactly like an employee. ATO has guidelines to determine their own status as a contractor, these guidelines only apply to 'Pay As You Go (PAYG)’

Land Tax Every State in Australia has Land Tax Land Tax is levied in NSW as follows – Property owned at midnight 31 st December – Principle place of residence is exempt – Land used as farms are exempt

NSW Land Tax Tax is payable on aggregated land value owned above the threshold x $0.016 Threshold in 2009 = $ Land Value = $ less threshold $ $ x $0.016 Land Tax Pay $2112

Other State Taxes Stamp Duties on Transfer of Property Mortgage Duties Vehicle Registration & Transfer

Federal Taxes Income Tax Company Tax Capital Gains Tax Fringe Benefits Tax GST

Fringe Benefit Tax Tax on non cash benefits given to employees Paid by employer Is a separate tax to income tax FBT Tax year 31 st March FBT Rate = 46.5% and levied on grossed up rate

Fringe Benefits Tax May include such items such as – allows an employee to use a work car for private purposes – gives an employee a cheap loan – pays an employee’s gym membership – provides entertainment by the way of free tickets to concerts – reimburses an expense incurred by an employee, such as school fees, and – gives benefits under a salary sacrifice arrangement with an employee.

Amount of FBT Tax If GST is claimed grossing up multiplier is Employer pays for Private Health Insurance of employee valued at $3000 Taxable FBT Amount $3000 x = $6201 FBT Tax Payable $6201 x 46.5% = Benefit Payable is now FULLY tax deductible from Income Tax

Vehicles FBT Payable where car is available for Private use. The following types of vehicles (including four- wheel drive vehicles) are cars: – motor cars, station wagons, panel vans and utilities (excluding panel vans and utilities designed to carry a load of one tonne or more) – all other goods-carrying vehicles designed to carry less than one tonne, and – all other passenger-carrying vehicles designed to carry fewer than nine occupants

Vehicle FBT Taxable FBT amount = Value of Vehicle x Statutory % X Days Available 365 Statutory % is determined by distance travelled <15000km = 26% to 24999km = 20% to 40000km =11% > 40000km=7%

Vehicle FBT A Toyota Camry is provided valued at $ Travels 13000km for the year $ x 26% x 1 = $ x (Grossing) = $ x 46.5% = $ Travels 43000km for the year $ x 7% x 1 = $2800x (Grossing) = $ x 46.5% = $ Travels 27000km for the year $ x 11% x 1 = $4400x (Grossing) = $ x 46.5% = $ Note All cost related to the vehicle private or business are now tax deductible incl. depreciation.

Capital Gains Tax Capital gains tax (CGT) is the tax you pay on any capital gain you make on the sale of an assett Capital Gain/Loss is basically the difference in purchase and sale price It is not a separate tax, merely a component of your income tax. You are taxed on your net capital gain at your marginal tax rate

CGT ASSETTS real estate – for example, a holiday home shares in a company units in a unit trust or managed investment fund collectables – for example, jewellery, and personal use assets – for example, furniture.

Capital Gains Tax Capital Gain/Loss = Sale Price – Cost Base Cost Base includes – The Original Purchase Price – Items that are not immediately tax deductable Agent Fees Solicitor Fees Council Rates for Holiday House – note if it is an investment property earning income, rates would be

Capital Gains Tax It is not a tax in itself but forms part of your assessable income tax Assessable amount is subject to discounts if kept for 12 months – Individuals 50 % discount – Trusts33 1/3 % discount – Companies0% Discount

Capital Gains Tax - Individual House Purchased in 2001 for $ House Sold in 2008 for $ – Cost Base = $ Purchase Price – $ Agent Fee on Sale – $ Legal Fees – $ Stamp Duty Cost Base = $ Capital Gain = $ $ = $ Assessable Income = $ x 50% = $

Capital Gains Tax - Company House Purchased in 2001 for $ House Sold in 2008 for $ – Cost Base = $ Purchase Price – $ Agent Fee on Sale – $ Legal Fees – $ Stamp Duty Cost Base = $ Capital Gain = $ $ = $ Assessable Income = $ (No discount)

Capital Gains Tax - Exemption Principal Place of residence an asset you acquired before 20 September 1985 cars, motorcycles and similar vehicles compensation you received for personal injury a personal use asset – for example, items such as boats, furniture, electrical goods

Income Tax Progressive Tax levied on assessable income Income is “World Wide Assessable Income” Assessable Income = Gross Income – Allowable Deductions

Income Income will include worldwide source of – Salary & Wages – Payments made under contract – Bank Interest – Dividends – Rent Received – (There are many other sources of Income)

Deductions Any cost incurred in running your business Items that are not allowable – Fines – Capital Costs (These must be depreciated) – Personal Items (E.g. Non Protective Clothing)

Taxable Income 08-09Tax Payable $0 -$6 000Nil $ $ c for each $1 over $6,000 $ $80 000$4,200 plus 30c for each $1 over $34,000 $80,001 – $180,000$18,000 plus 40c for each $1 over $80,000 $180,001 and over$58,000 plus 45c for each $1 over $180,000 Determine Assessable Income and Tax Payable Money Received Costs for the Year Contract Income $95 000Fuel for work Vehicle $ Bank Interest $1 500Income Insurance$ Income Protection $3 700Materials$ Rent Received $9 500Workcover Licensing$ 120 Work Cover Fine$ Mortgage Payments$ ($2500 Int) Ute Purchase $35 000

Answer to Weekly Review

Depreciation Scedule

Taxable Income 08-09Tax Payable $0 -$6 000Nil $ $ c for each $1 over $6,000 $ $80 000$4,200 plus 30c for each $1 over $34,000 $80,001 – $180,000$18,000 plus 40c for each $1 over $80,000 $180,001 and over$58,000 plus 45c for each $1 over $180,000 Assessable Income = $ $ = $ Tax Payable = $ ($ $34 000) x $0.30 = $ $ = $